For Hedge Funds, a Half Percent Is the New Move

Wary of geopolitical tumult and eager for their first quiet August in years, some hedge-fund managers scaled back the size and scope of their bets in recent weeks, a pullback that was reflected, say traders, in muted monthly returns.

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Across the board, hedge funds were up .5 percent for the month of August, according to numbers compiled by Hedge Fund Research, and up about 2.23 percent for the year.

Those modest, if positive, returns, reflected a decline in the overall appetite for risk, some traders said, after unpredictable central-bank activities, volatile oil prices, ephemeral new regulations and ongoing trouble in Europe rendered some money managers fearful to act. (Read More:Why a German Recession Could Hurt the Euro.)

Now that September has arrived, however, many of those traders may be jumping back in to the fray. “Right now people are starting to put risk back on,” one macro trader said. “Everyone’s hoping to make the year in the next four months.”

The Tudor B.V.I. Global Fund, for instance, was up just .5 percent through the third week of August, according to people familiar with its performance, but up more than 3 percent for the year overall. Maverick Capital Management’s funds, all of which have been on a tear this year after a devastating rout last year, are up roughly 1 percent for the month of August — making the month a fairly small contributor to their more than 20 percent rally year to date, according to someone with knowledge of Maverick’s results.

Return of Risk?

Hedge fund managers apparently see the month of September as "risk-on," reports CNBC's Kate Kelly.

Despite the fear in the markets, some lagging August returns may have had more to do with specific positions than with reduced leverage, said another hedge-fund manager, noting that Maverick, for one, has benefited this year from longstanding equity positions – both long and short – that served it poorly in 2011 but have bounced back since. Still, other hedge-fund traders and analysts pointed out that by some measures, managers of long-short equity funds reduced their leverage levels as August wore on, and that volume toward the end of the month fell dramatically. (Read More:Time to 'Separate Men From Boys'.)

Meanwhile, funds that have struggled to generate returns this year continued the trend with meager Augusts. Moore Global, the large macro fund, had fallen about .8 percent by the third week of August, according to hedge-fund trackers and someone familiar with the matter, who said final monthly returns haven’t yet been distributed, leaving it up a little less than 1 percent so far this year. Brevan Howard, the enormous macro fund based in Europe, was up roughly 1 percent through late August, according to one hedge fund report, but down about a quarter of a percent for the year during the same period.